On Monday, oil prices continued to rise, with Brent crude hitting $80 as concerns over a potential escalation of conflict in the Middle East fanned fears of delays to exports from this vital oil producing region.
Brent crude futures rose by $1.09, or 1.4%, to $79.14 a barrel earlier today, according to Reuters. Meanwhile, US West Texas Intermediate oil futures rose $1.15, or 1.55%, to $75.53, following a sudden surge of more than $2 earlier in the session.
This surge in oil prices comes after last week’s largest weekly increase since early 2023, highlighting market sensitivity to geopolitical tensions and their consequences for global oil supplies.
“Brent crude is back to challenge $80, with activity in the options market showing increased demand for hedging the risk of further gains amid worries about a minor or, in the worst case, major supply disruption from the Middle East,” head of commodity strategy at Saxo Bank, Ole Hansen said.
Brent crude rose over 8% last week, while West Texas Intermediate (WTI) surged 9.1%, amid concerns that Israel could target Iranian oil infrastructure in response to escalating regional tensions.
Rockets launched by Iran-backed Hezbollah struck Israel’s third-largest city, Haifa, early Monday morning. In response, Israel appears ready to escalate its ground incursions into southern Lebanon. This comes on the first anniversary of the Gaza war, which has intensified conflict across the Middle East and heightened regional tensions.
“We see a direct attack on Iran’s oil facilities as the least likely response among Israel’s options,” it said, noting the buffer provided by producer group OPEC’s 7 million barrels per day of spare capacity.
The Organization of the Petroleum Exporting Countries and its allies, including Russia, known collectively as OPEC+, are set to begin increasing production in December. This decision comes after years of production cuts aimed at supporting prices amid weak global demand.
Analysts have indicated that OPEC+ possesses sufficient spare oil capacity to compensate for potential disruptions in Iranian supply resulting from Israeli actions. However, they warn that the group could face challenges if Iran retaliates by targeting oil installations in neighboring Gulf nations, which could lead to significant market instability.
“While nothing can touch the emotion that the conflict has brought to the oil community, it has been well and truly smothered by macroeconomic considerations that have thwarted any idea of an increase in global demand,” said John Evans of oil broker PVM.
